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Financial Inclusion Measurement in the Arab World

Data suggest that there is great potential to deepen financial inclusion in the Arab world.

Gathering and analyzing quality financial inclusion data is only the first step toward addressing the structural bottlenecks in financial access. Today, over 60 countries worldwide have launched reforms aimed at improving financial inclusion, including large countries such as Brazil and Mexico.

In the Arab world, progress has been made over the past few years with some notable regulatory improvements in place. However, change focused on microcredit and, more specifically, on microcredit to individual entrepreneurs, which is now reaching more than 3 to 4 million people in the region. Nonetheless, this figure is far from rivaling the estimated 92 million who report borrowing through informal channels, and access to formal savings is still missing for 68 percent or 168 million adults in the Arab world (Global Findex 2014). Much more needs to be done to provide full access to formal financial services.

Improvements in financial inclusion indicators will come only from significant changes in the actual outreach of formal financial services, which in turn require changes in the financial sector architecture. Morocco, the country that has made the most progress toward financial inclusion, has proactively changed its policies to embrace financial inclusion, notably by (i) granting a banking license to the postal network in 2009, leading to the creation of Al Barid Bank where over 500,000 new accounts were created during the first years of operation, and (ii) making it compulsory for commercial banks to offer low-income banking products.

Priorities and solutions will no doubt vary across countries. However, enhancing financial inclusion cannot go without also analyzing the legal and regulatory framework, as financial regulators and supervisors have a critical say in expanding financial inclusion opportunities while overseeing market conduct. This is why the Financial Inclusion Taskforce is planning an exercise to take stock of existing laws, regulations, and mandates related to financial inclusion across its member countries. By doing so, it expects to identify regulatory or institutional bottlenecks that can be corrected to significantly improve access to finance.